If you're considering investing in biopharma companies it can certainly test the rules of being a patient investor. Pharmaceutical companies are the kind of investment that can take a while to bloom. Years of clinical trials, scrutinized results, and a hopeful but not guaranteed FDA approval is all part of the lifecycle. If clinical trials repeatedly fall short of expectations or fail to secure an FDA approval it can be money down the drain for investors. If a breakthrough happens it can make investors very rich.
Fate Therapeutics (FATE -0.62%) is looking for the latter to happen for its immunotherapy treatments of B-cell lymphoma -- cancer that forms in a person's white blood cells. But after its latest clinical trial results, is the company's stock a nice pick for bargain hunters? Or is this a sign to get out while you can?
Image source: Getty Images.
The data
The company is in early testing of two treatments, labeled FT596 and FT516. On Aug. 19, Fate delivered preliminary data of early clinical trials showing some effectiveness in treating blood cancer, but results fell short of expectations by some investors.
FT596 was tested on patients as a monotherapy used in conjunction with a single dose of the drug rituximab, and after the patient received three days of chemo treatments. In a small segment of patients -- 14 in all -- 71% showed objective response, meaning the response was measurable. Of the 10 patients showing measurable response, half of them showed signs of complete response, meaning the signs of cancer had gone away.
For FT516, eight patients out of 11 showed a measurable response, with 75% of those measurable showed the signs of cancer had gone away. Unfortunately, though some patients continued to show complete response for as long as nine and a half months, a handful of patients who had previously shown complete response began to show the cancer progress at around the four month mark after treatment.
The reaction
It is this return of the cancer that has some investors and analysts concerned about the effectiveness of the treatment dosage. Jefferies analyst Michael Yee suggested to clients that additional data is needed in regards to durability. That additional data is expected to be presented by Fate later this year at the American Society of Hematology conference held Dec. 11-14.
The lack of data to provide confidence for investors led to the bottom dropping out of the stock over a two-day period, from August 18-20. The stock price dropped by over 26%, from $91 down to $67, bringing its year-to-date total decline to 45%, from a high of $121 in January. Depending on how you look at it, either as a bargain hunter perspective or an anxious shareholder, this could be good news or bad news.
The good news is, that initial drop hit a bit of a cushion, which allowed the stock to bounce back a bit over the past few weeks, providing some signs of an opportunity to get in on the dip. The bad news is, that low of 67 is once again being tested in the past few days, which could mean more declines are on the way.
The hope
One positive signal that may give individual investors hope is that Cathie Wood, owner and founder of ARK Invest, recently purchased over 240,000 shares of Fate. The shares are now part of the top holdings in Wood's ARK ETFs, with the ARK Genomic Revolution ETF (ARKG -0.93%) holding 55,000 shares -- the fourth-highest asset weight in the top 10 holdings -- and the ARK Innovation ETF (ARKK -2.77%) holding 186,000 shares. For those who may not be familiar with Wood or these ETFs, the ARK Genomic Revolution ETF was the leading ETF in returns for 2020 at 180% for the year.
I'm not one to disagree with Wood; after all, those funds had an amazing 2020, and the recent tanking of Fate's stock price does offer bargain hunters a dream opportunity. But with both treatments in early clinical trials using a small sample size of patients, Fate may not be the investment of choice for those not willing to take a bit of a risk on pharmaceutical companies.
Perhaps the recent dip will provide an entry point for opportunistic investors looking to take that risk. And maybe with September being blood cancer awareness month we might possibly see some kind of hopeful -- even sentimental -- action by investors that makes the stock price hold steady and start to climb once again. For now, I'll be looking toward December and any news coming out of the ASH conference presentations. If new data supports a positive outlook, this stock has certainly set itself up as a bargain.
